After a Plunge, Stocks Close Higher

By JACK HEALY; Bettina Wassener contributed reporting.

Published: November 14, 2008

After slumping to some of its lowest levels of the year, Wall Street soared in a late rally on Thursday and closed significantly higher, during a chaotic session in which the Dow ranged across nearly 900 points.

The surge lifted shares 10 percent from their daily lows and ended three days of losses on Wall Street. The Dow shot up 870 points over three hours, and the broader Standard & Poor's 500-stock index closed up 6.92 percent after hitting its worst point in five years.

The Dow Jones industrial average, which was briefly down 316 points, ended 552.59 points higher, or 6.67 percent, at 8,835.25. The S.& P. gained 58.99 points, to close at 911.29, and the technology-heavy Nasdaq composite index rose 97.49 points, or 6.5 percent, to 1,596.70.

The market's abrupt about-face left investors and analysts grasping for explanations.

''The markets have two minds here,'' said Michael Feroli, an economist at JPMorgan Chase. ''On the one hand, the data continues to be terrible. On the other hand, I think there's people trying to pick bottoms here.''

Analysts said that the buying spree began after the markets crossed two important psychological thresholds: the Dow fell below 8,000, and the S.& P. dipped under its previous yearly low. Bargain hunters, sensing that the market was retesting its bottom, began buying and did not stop.

''We pulled back to some previous lows that were pretty monumental,'' said Jocelynn Drake, an equities analyst at Schaeffer's Investment Research. ''A lot of people saw this as an opportunity.''

The energy sector posted some of the biggest gains of the day after the Organization of the Petroleum Exporting Countries said its members would meet Nov. 29 to discuss cutting production.

Crude oil prices and energy stocks, which have tumbled in recent weeks on fears of falling demand, rebounded on Thursday. Crude settled at $58.24 a barrel. Shares of Exxon Mobil were up 9.4 percent, to $75.41, and Chevron gained 12.5 percent, to close at $75.71.

All major financial sectors were up Thursday, and all but two of the 30 companies in the Dow finished higher. General Motors closed down by 4.2 percent, at $2.95, and Citigroup lost 2 percent, to close at $9.45.

For many companies, the rally transformed a rough day into a banner one. Shares of Intel dropped after the company cut its sales outlook, but they were swept up in the buying and finished up 6.7 percent, at $14.43. Other technology stocks like Microsoft, Google, Sun Microsystems and Apple also finished higher.

Wal-Mart Stores, the world's largest retailer, rebounded from negative territory to close up 4.4 percent. The company reported a 10 percent increase in third-quarter profit on Thursday but reduced its profit outlook.

Even shares in retailers like Kohl's, Macy's, Gap and American Eagle, which are facing a bleak holiday shopping season, ended higher.

The rally on Thursday surprised many analysts because it came on another day of glum economic data that presage a broad and lasting downturn. The government reported that initial jobless claims rose to a seasonally adjusted 516,000 last week, and said that imports and exports fell sharply in September as the trade deficit narrowed.

The disconnect between higher unemployment, lower consumer spending and a 550-point rally of the Dow underscores the instability in the markets, and some analysts said they doubted the gains would hold.

''The volatility is definitely not out of the market,'' Ms. Drake said. ''I'm very reluctant to say, 'Oh wait, the bottom's been reached.' To me this is more of a flash in the pan.''

But James B. Stack, president of InvesTech Research, said the market was trying to find its bottom, and said he was encouraged by the rebound.

''It was a classic retest of the lows that was successful,'' he said.

Markets in Asia had some of their steepest declines this month on Thursday amid fresh worries about the state of the American and Chinese economies and poor corporate news out of the United States. But Friday morning, however, many rebounded.

The Nikkei 225 in Japan was up 4.26 percent in Friday morning trading, and the Hang Seng in Hong Kong gained 3.34 percent.

In Europe, several major indices were mixed in trading on Thursday. The DAX in Frankfurt finished up 0.6 percent; in London, the FTSE 100 ended down 0.3 percent. The CAC 40 in Paris gained 1.1 percent.

Interest rates were higher. The Treasury's 10-year bill fell 1 percentage point, to 99 5/32. The yield, which moves in the opposite direction from the price, was at 3.85 percent, up from 3.65 percent late Wednesday.

Following are the results of the Treasury auction on Thursday of 182-day cash management bills and 30-year bonds:

CHART: Freddie Mac Yields: Average for some Federal Home Loan Mortgage Corp. securities. (Source: F.H.L.M.C.); The Dow minute-by-minute: Position of the Dow Jones industrial average at 1-minute intervals yesterday. (Sources: Associated Press; Bloomberg)